Worldspan prices downsized deal; Reynolds bonds rise on tobacco suit ruling

By Paul Deckelman and Paul A. Harris

New York, Feb. 7 - Worldspan LP and WS Financing Corp. were heard by high-yield syndicate sources Monday to have priced a downsized offering of new floating-rate six-year bonds. On the other hand, the sources said that Valor Telecommunications Enterprises LLC had upsized its impending offering of new 10-year bonds.

In the secondary market, bonds of tobacco giant Reynolds American Inc were said to have been firm in the wake of Friday's ruling by a federal appeals court that the government cannot legally force Reynolds and other tobacco companies to disgorge $280 billion in past profits as part of its ongoing litigation with against the cigarette makers, with the government claiming they illegally conspired to boost nicotine levels in their cigarettes while at the same time allegedly trying to downplay the substance's dangerous effects.

While Monday saw spreads tighten marginally on "listless volumes," the primary market cranked out three deals totaling $329 million and €215 million.

Among the three issuers, Atlanta-based computerized travel reservation systems company Worldspan LP priced the biggest, a downsized $300 million that came well wide of price talk.

Meanwhile the forward calendar that sources, late last week, were characterizing as "pretty unpersuasive" - with no roadshows whatsoever presently seen extending into the Feb. 14 week - became no more persuasive on Monday, as no new roadshow starts were heard.

Extended tailgate party?

Although Monday's session produced a steady stream of details on issues already known to be in the market, more than one source found time to mention Sunday's Superbowl XXXIX.

"Maybe people are still hungover," one source suggested, regarding the week's uninspiring start in high yield.

Three deals priced during the session.

WS Financing Corp., issuing in conjunction with Worldspan LP, priced a downsized and restructured $300 million issue of six-year senior secured second-lien floating-rate notes (B3/CCC+) at par on Monday to yield three-month Libor plus 625 basis points.

That was 25 basis points wide of the Libor plus 575 to 600 basis points price talk.

The issue size was decreased from $350 million with $50 million being shifted to the company's term loan. Also call protection was increased to 1.5 years from one year.

JP Morgan, UBS Investment Bank, Lehman Brothers and Deutsche Bank Securities ran the books.

One market source said that the deal got a mixed reception from the accounts.

Elsewhere Iesy Repository GmbH priced €215 million of 10-year senior subordinated notes (Caa1/CCC+) at par to yield 8¾%, right on top of the 8¾% area price talk.

JP Morgan and Citigroup were joint bookrunners for the acquisition financing from the German cable television operator.

And in quick-to-market action on Monday, PAHC Holdings Corp., the newly formed parent company of Phibro Animal Health Corp., priced an upsized $29 million issue of non-rated five-year senior secured notes at par to yield 15%, which was right on top of price talk, according to an informed source. The deal was increased from $26 million.

Jefferies & Co. ran the books for the deal, proceeds from which will be used to refinance the Fort Lee, N.J., animal feed additives company's series C preferred stock.

Valor upsizes

Details emerged Monday on several of the deals set to price during the current week.

Valor Telecommunications Enterprises LLC/Finance Corp. has upsized its offering of 10-year senior notes (B1/B) to $400 million from $280 million, with the $120 million difference having been shifted away from the company's term loan B.

Price talk is for a yield in the 7 5/8% area, with the notes expected to price on Tuesday via Banc of America Securities, JP Morgan and Merrill Lynch & Co.

Meanwhile American Commercial Lines LLC/ACL Finance Corp.'s $200 million of 10-year non-call-five senior notes (B3/B-) are talked at 9 5/8%-9 7/8%, with pricing expected on Tuesday afternoon via UBS Investment Bank and Banc of America Securities.

Builders Firstsource Inc.'s $250 million offering of seven-year second-priority senior secured floating-rate notes (expected ratings B3/B-) are talked at Libor plus 425 to 450 basis points, and are expected to price Tuesday afternoon via UBS Investment Bank and Deutsche Bank Securities.

Two other deals are parked on the forward calendar as probable Tuesday business.

Seattle-based pulp producer Mercer International is expected to price $300 million of eight-year senior notes (Caa1/B), via RBC Capital Markets.

Price talk is 9% to 9¼%.

One sources characterized the deal as a blowout.

Finally, Cranbury, N.J.-based phosphoric acid-producer Innophos Investments Holdings Inc. is in the market with $120 million of 10-year senior floating-rate notes (Caa2), via Bear Stearns & Co.

Some source anticipated hearing terms on the deal by Monday's close, however none emerged before Prospect News went to press.

Proceeds from the Innophos deal will be used to fund a special $114 million dividend to its current shareholder, Bain Capital.

Worldspan creeps up in trading

When the new Worldspan floating-rate notes due 2011 were freed for secondary dealings, they were heard to have firmed slightly to 100.25 bid, 101.25 offered from their par issue price earlier in the session.

Reynolds higher

Back among the established bonds, a trader quoted R.J. Reynolds' 7¼% notes due 2012 at 107, up a point.

Another trader said that the Winston-Salem N.C.-based tobacco giant's paper "kind of settled in today at levels, even though there was a lot of short paper there, after Friday's news" that a federal appeals court had blocked government efforts to attempt to force Reynolds and other large cigarette companies to disgorge some $280 billion of profits.

He saw the company's 7 7/8% notes due 2009 at 108.5 bid, 109.5 offered, up from 107.25 bid, 108.25 offered prior to the late-Friday news, "up about a point-and-a-half."

He characterized the company's shorter paper as "pretty much status quo," although he saw its 6½% notes due 2007 at 104 bid, 105 offered, up about a point from prior levels. Even so, he said, "they can't really run past that constraint [on prices] because of their maturity."

At another desk, the Reynolds 7¼% notes due 2008 were called up a point, quoted at 108 bid.

In its Friday ruling, the U.S. Court for Appeal for the District of Columbia declared in its ruling that the lower district court had erred in allowing the Justice Department to pursue disgorgement of past profits as a potential punishment for the tobacco companies, finding that "we can find no justification for considering any order of disgorgement," and adding: "We need not twist the language to create a new remedy not contemplated by the statute."

Reynolds said the ruling "dramatically transforms the DOJ suit."

Collins & Aikman drops

Elsewhere, Collins & Aikman Products Co.'s subordinated bonds were seen down as much as 3½ points early in the session and its senior paper was pegged down nearly two points, although those bonds later bounced off their lows to end with smaller losses.

Traders said there was no fresh negative news out on the Troy, Mich.-based automotive components supplier.

A trader said that "they've gone down the last couple of days - they're getting rapped pretty hard here in sympathy, I think, with [RJ] Tower," which filed for Chapter 11 protection last week

He saw C&A's 12 7/8% notes due 2012 at 79 bid, 80.5 offered, down from 82 bid, 83 offered on Friday, while its 10¾% notes due 2011 ended at 98.75 bid, 99.75 offered.

"I don't see the news," he puzzled, pretty much ruling out the possibility of covenant problems or the like being the proximate cause of the downturn, stating that the automotive analyst at his shop had looked at the bonds' indenture and had found nothing that would trigger any immediate debt or liquidity problems.

Instead, he reiterated, that "we think it's because they're in the same business as Tower, unless we're missing something. But it looks OK though," covenant-wise.

The 103/4s, he said, won't be affected as much as the 12 7/8s by whatever problems the company or the auto parts industry has "because it's the senior piece in the capital structure."

Another trader quoted the Collins & Aikman bonds down about a point across the board, the 12 7/8s at 79 bid, 81 offered, and the 103/4s at 98 bid, par offered.

Goodyear bonds gain

The first trader said that in general, the automotive sector was still reeling from Tower's troubles - but one name which he said was an exception Wednesday was Goodyear Tire & Rubber Co.

Even though the Akron, Ohio-based tire-making giant's stock "keeps going down, after one of the investment banks put it on the 'sell' list on the stock side, the bonds are reaching relative new highs. The bonds have been going opposite the stock."

He quoted Goodyear's 7.857% notes due 2011 as having traded as high as 103 before settling in around 102.75 bid, 103 offered.

He mentioned "rumors that they may be tendering for their short paper," which he said propelled the company's 6 5/8% notes due 2006 up to 105, "which is tight," and the 8½% notes due 2007 traded up at 107, "which is very tight, and their 11% notes due 2011 are at 116 bid - and I haven't seen that level in quite a while.

"So that's been holding out pretty well, and it's going counter to most of the credits in that industry, with the exception of Dura Automotive. That whole industry is hurting."

U.S. Concrete rebounds

Outside the sector, several market participants mentioned U.S. Concrete's 8 3/8% notes due 2014. "Before earnings," said a trader, "they traded at 107.25. Then their earnings looked weak and they traded down to 103.5 bid, 104.5 offered. Now they're back up to 105.5-106.5."

At another desk, a market source saw the concrete company's bonds harden to 106 bid, from 103.5.

Friendly lower

The trader said that "there seems to be a divergence of opinion on Friendly Ice Cream - some people like it, some people think they're going to have a very weak period."

He said that the Wilbraham, Mass.-based ice cream producer and restaurant operator's bonds "were up there for quite a while, but [Monday], the 8 3/8% traded down in the 97-97.25 range, which is down about a point."

Another trader said that "retail was a little stronger today," with Saks Fifth Avenue's 7½% notes due 2010 - which previously had been 106-107, "under a little pressure, I think some sellers" - as having opened Monday at 107.25 bid, 108 offered, "with some trading taking place in that context."

In the drugstore segment, he said, Rite Aid Corp.'s 7 1/8% notes due 2007,"which people have been looking for, had been as low as 98.5 bid, 99.5 offered about two weeks ago - today I'd call 'em par-101. So a little strength there".

And the casino names were "a little stronger across the board, on some buyers of MGM Mirage paper," the trader said, quoting its 6% due 2009 - which had been 101.75 bid, 102.75 offered "for the longest time" - as now trading between 102.5 and 103.25, "so there's a little strength there."

Overall, the trader said, the junk market was "a touch stronger, but on not a ton of activity. I'd say between ¼ and ½ stronger across the board. Northing in particular really stuck out."

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.